Betfair Official Blog

Time for the Fed to call the Samaritans

Daily View - 3rd April...

As the Fed does its impersonation of some sheriff in a Glen Ford western riding to the rescue of all that capitalism stands for, there are some slightly worrying issues that still remain to be resolved.

Added to this, the Fed has cut rates to 2.25% in an attempt to loosen up the liquidity of the cash markets, but this has not had the desired effect yet and even overnight lending between the banks is at 3%. I am also slightly bemused as to the logic of cutting rates to encourage people to lend money. If I was sitting on my pile of dosh, I would hardly be encouraged to lend it at the same risk for less return.

There is little more that the Fed can do. Its armoury is almost depleted so the triple-pronged barrage simply must be successful. The asset values of much of the collateral that props up this debt has also been severely impacted with equity, property and currency falls all weakening one side of the equation, whilst the other only has the Fed rate cuts to help it along.

Today saw a peaceful start with most of the indices trading at pretty much the same levels as yesterday's close. The bull run managed another day of solid gains in the FTSE, but the suspicion is that much of the move has been of the bear squeeze variety. There are still some heavy shorts out there in the banks and the feeling is growing of the possibility that the current move may well have another leg to it, as bears finally get pushed into covering their positions.

The FTSE is currently at 2914-5915 off one whole point, and the trading range for the first hour has been almost miserly. With the Non Farm numbers out tomorrow from the States, we may well be in for some consolidation at these prices as traders flatten out positions in anticipation of what might be a BIG mover.

On the currency front, the Dollar continues to put in a good performance raising well above 100 against the Yen and pushing towards 1.56 versus the Euro. Rather unnervingly the GBP/EUR and EUR/USD have swapped places over the past six months - a good indication (if any were needed) of the continued decay in both the Pound and the greenback.

Gold managed to climb back up to the medium term trend line at $904 which it broke through on Tuesday, but it is now backtracking away from here, and is currently at 898.0-898.5 just below the psychological $900 level.